Is the pound's rally over? Sterling hits new six-week low versus the US dollar

Sterling hit another six-week low against the US dollar today in a sign that its year long rally against the greenback may be over.

Yesterday the pound fell as low as $1.6933 – a level not seen since mid-June – despite a sharp pick up in mortgage lending last month which enhanced rate hike possibilities, before easing off that level.

Bank of England figures on Tuesday showed 67,196 mortgages were approved in June – up from 62,007 in May and the first increase since January.

Low: The pound fell as low as $1.6925 today, a level not seen since mid-June

Today the pound drifted back to a low of 1.6925 versus the US dollar, before recovering late morning to 1,6934. unsettled by data showing that UK consumer confidence suffered a dip in July, although it was still at a strong level according to the European Commission using information compiled by research firm GfK.

The EC’s confidence indicator retreated to a four-month low of -4.8 in July from +7.4 in June and a record peak of +7.6 in May. Consumer confidence had previously trended up from +5.7 in April, +3.3 in March and -3.3 in December 2013.

However, the European Commission’s consumer confidence is still substantially above its long-term average of -9.6.

Michael Hewson, chief market analyst at CMC Markets UK said 'the lack of rebound remains a concern and we could well see a move towards 1.6845' by the pound versus the dollar.

The pound has jumped from below $1.49 in July last year to nearly $1.72 early this month on rising confidence in the UK economy and speculation over higher interest rates.

But the dollar has staged a comeback in recent weeks on the back of falling unemployment in the US and signs the world’s biggest economy is strengthening.

American consumer confidence is at its highest for seven years while official figures due today are expected to show the economy grew at an annual rate of around 3 per cent in the second quarter.

Following its latest policy meeting, the US Federal Reserve is today expected to cut its monthly-bond buying programme by another $10billion to $25billion having steadily reduced it from $85billion.

The US central bank is on course to bring the programme to an end in October – leaving it free to then start raising interest rates.

‘We remain optimistic about the US economy,’ said Erik Britton at Fathom.